CFPB Proposes Prohibiting Inclusion of Medical Debt on Consumer’s Credit Reports
On August 10, 2023, CCLP celebrated our 25th anniversary, bringing friends new and old to the Carriage House at the Governor's Residence.
Katie Wallat, CCLP’s Senior Attorney, provided testimony at the August 11, 2023, meeting of the Medical Services Board.
HB23-1126 provides first-in-the-nation protections for Coloradans with medical debt.
Case could implicate ‘Obamacare’
Earlier this month, a D.C. federal district court judge ruled that the Obama administration improperly funded an Affordable Care Act (ACA) program that reduces out-of-pocket health insurance costs for low- to moderate-income people. The lawsuit, House of Representatives vs. Burwell, was filed in November 2014 by the House of Representatives, which is the plaintiff in the case.
The ACA provides two types of financial assistance for plans purchased through a health insurance exchange: premium tax credits and cost-sharing reductions. The ruling concluded that the Obama administration could not continue to fund cost-sharing reductions because there had never been a congressional appropriation for that program. The ruling does not affect funding for premium tax credits.
Premium tax credits reduce premium costs and are available to individuals in households that earn between 100 percent and 400 percent of the federal poverty level (FPL). Cost-sharing reductions reduce deductibles, copays and coinsurance and are available to individuals who purchase “silver” plans, are eligible for tax credits, and earn less than 250 percent of the FPL, which in many parts of Colorado is less than the income needed to be self-sufficient.
Cost-sharing reductions can significantly reduce the amount individuals pay in order to receive care. As outlined in an article from Kaiser Health News, a family of four whose income is between 100 and 150 percent of the FPL ($23,550 to $35,325) will be responsible for paying 6 percent of covered expenses out-of-pocket compared with the 30 percent that a family not getting cost-sharing reductions would owe in a silver plan. A family with an income between 150 and 200 percent of the poverty level ($35,325 to $47,100) will be responsible for 13 percent of expenses instead of 30 percent, and one with an income between 200 and 250 percent of the FPL ($47,100 to $58,875) will be responsible for 27 percent of expenses instead of 30 percent.
Both the premium tax credit and the cost-sharing reductions programs are authorized under the ACA but the House of Representatives argued that Congress never appropriated monies to fund the cost sharing reductions program. Ruling in favor of the plaintiffs, a federal district court judge in the Washington D.C. circuit agreed that Congress had never made such an appropriation.
Federally funded programs require both authorization from Congress and a congressional appropriation of funds. The appropriation for the premium tax-credit program was included in a section of the United States Code that provides a permanent recurring appropriation for certain tax refunds and programs under the tax code. The administration argued that the appropriation for the cost-sharing reductions program was included under the appropriation to the tax-credit program. But the judge disagreed, ruling that the plain language of the appropriation clause demonstrated otherwise.
The ruling, which enjoins the federal Department of Health and Human Services (HHS) from expending any additional money on the cost-sharing reductions program, will have no immediate effect because the judge stayed the effect of her decision pending any appeals. Additionally, even if the plaintiff is ultimately successful, consumers will not lose the cost-sharing reductions they currently receive as a result of this case.
That is because the cost-sharing reductions program requires insurance carriers to reduce the cost-sharing obligations of individuals who purchase silver plans and meet the income eligibility requirements. That obligation on insurance carriers is not being challenge and will not go away as a result of this case. The ACA requires HHS to reimburse insurance carriers for the cost-sharing reductions they provide and it is those back end reimbursements that will have to discontinue if the plaintiff is ultimately successful.
What is less certain is how the carriers will deal with the discontinuance of the federal reimbursements. It is reasonable to expect an increase in premiums. As outlined by The New York Times, a study by HHS estimated that premiums for silver plans could rise by 30 percent without cost-sharing reimbursements. Premium increases will make health insurance more expensive for insured individuals that do not receive premium tax credits. But for those beneficiaries that receive tax credits, the impacts on affordability will be mitigated because the tax-credit program is designed to keep premium costs to the individual at a fixed percentage of household income.
Therefore, while HHS would no longer be permitted to expend funds on cost-sharing reimbursements if the House of Representatives wins the case, increasing premiums would cause expenditures on tax credits to increase. As also noted by The New York Times article, the Urban Institute estimates that additional spending for premium tax credits would total $3.6 billion in 2016 and $47 billion over the next decade.
Not everyone thinks premium increases are inevitable, however. Responding to The New York Times story, another article points out, that insurance companies should be able to sue for the reimbursements they are owed under the cost-sharing reductions program — potentially avoiding the need to raise premiums in the long run. The article notes that whether or not there is an appropriation for cost-sharing reductions, the statutory obligation HHS has to reimburse the insurance carriers is enforceable in the Court of Federal Claims. Therefore, lawsuits by the carriers would likely be successful and Congress has permanently appropriated money to pay court judgments.
Even so, it is unlikely that a ruling in favor of the plaintiffs will be easily or quickly resolved through litigation. We hope, in the event that plaintiffs prevail, that Congress will fund this critical affordability program it already authorized.
For now, the administration has indicated its intention to appeal the decision to the D.C. Circuit Court of Appeals. We will continue to watch the case as it moves through the appeals process.
– Allison Neswood